OT: Bill Bonner says........

Well, is it for real or not? Is this a once-in-a-lifetime
event, marked by accelerated growth, corporate profits
and productivity? Or is it just another bubble?

Our very own Dr. Kurt Richebacher has already provided
the answer. He has shown that there has been no marked
acceleration of productivity, output or corporate
profits. Throughout the bull market of the last 19 years,
corporate profits have risen, inflation adjusted, by only
61%. The S&P composite should have risen a similar
amount. Instead, it rose nearly 10 times as much -- 570%,
again inflation adjusted.

And the chart in the "WSJ," celebrating the longest
expansion in history, shows that GDP growth rates have
not accelerated at all. They are lower than they've been
for most of the period from 1870 to 1981!

Productivity gains are largely a statistical mirage, too.
If people really were more productive, they'd be earning
higher wages. But wage growth has been lower than most
preceding periods, not higher.

In short, there's been no revolution on Main Street --
where people live, work, spend money and get mugged. Life
goes on as usual.

The revolution, if you can call it that, has been on Wall
Street, where investors have come to believe in the New
Era of the Internet and are desperate to get a part of
it. While corporate earnings increased modestly, stock
prices lacked all sense of modesty or dignity. P/E ratios
on the S&P went from eight in 1981 to 32. Nasdaq stocks
let it all hang out -- rising to an estimated P/E of 200.
The stock market as a percent of the whole economy went
from 50% to 150%.

Dr. Richebacher identifies the source of this madness,
too. Like the other "euphoric speculative bubbles that
have dotted human history," this one is caused by
excessive credit. In the last four months of 1999, for
example, the money supply, as measured by M3, rose by
$340 billion, compared to about $200 million in the eight
months preceding.

You can study the broad sweep of credit expansion by
looking at the relationship of credit to GDP. At its
previous peak, in the 1920s, there were $2 of credit
created for every $1 of GDP. Today, the relationship is
4-to-1. This money explosion, according to Dr.
Richebacher took "the stock market with it."

How will it end? Dr. Richebacher quotes Ludwig von Mises,
"There is no means of avoiding the final collapse of a
boom brought about by credit expansion." Watch this
space.

But today I'm reaching for a more profound point. People
believe in the New Era of the Internet as though it were,
well, a profound revolution. Kids stay up all night,
working feverishly on Internet projects, as if they
thought they were doing something important. Not just
something that might be profitable.

Like all new technology, the Internet will surely have a
lot of unforeseen consequences -- but nothing so far
looks very profound, important or serious. So what if you
can order a pair of Nikes or the services of Veronica on-
line? Why the almost messianic faith?

The answer I believe is to be found in the way people
long for revolutionary change. In Peter Weiss's play,
"Marat/Sade," the Marquis de Sade explains why people
make revolution. "One man has a fat wife and wants a
skinny one. Another has a skinny wife and wants a fat
one."

Hitler's childhood friend later recalled that when the
boys would wander about the neighborhood, young Adolf
would want to change everything. He would point to houses
and say the roof should be lowered...or to roads and
suggest that they should be moved elsewhere. He seemed to
want to remake the entire world.

George Orwell wrote that revolutionaries "imagine that
everything can be put right by altering the shape of
society."

An old friend of mine, Bill Strauss, wrote a book
describing a kind of generational dialectic, in which
each generation had its own personality and reaction to
the one ahead of it. It is a hallmark of youth to think
it can do better. There is always the danger that young
people will embrace whatever silly idea is fashionable
and, unless they are stopped, take it to grotesque
extremes.

The French Revolution, which eventually brought Napoleon
to power and his brother Jerome to Baltimore, might have
been sired by the ideas of the Enlightenment -- but it
was the product of a baby boom in France in the late 18th
century. So many young people, with their new ideas, were
irresistible.

More than a century later, the ideas of another group of
angry young men -- Mussolini, Hitler, Lenin and Trotsky -
- were irresistible. Again, it was the young who took to
them, believing that they could make the world a better
place.

Later, in America, another revolution gripped the young.
I recall it well. People wore strange clothes. They
discovered sex. They painted their VW buses psychedelic
colors and took road trips. They invented new words and
phrases...and new music. It was all very far out. They
believed that something revolutionary was taking place in
American culture. Something important. Something
profound.

In the words of Bob Dylan, "Something's happening and you
don't know what it is...do you, Mr. Brown."

It was exhilerating at the time -- though it seems as
preposterous as a tie-dyed T-shirt now.

Remy de Gourmont said of the French Revolution that it
was "nothing but the anger of a disappointed child."

Today, the children believe they are remaking the world,
too. The Internet, they believe, slouched to Jerusalem
and now spreads its light upon the world. If you don't
believe...you just don't get it.

But unless I'm wrong, not getting it may be better than
getting it. The Internet revolutionaries may soon turn
out to be like Robespierre or Jean Paul Marat..or perhaps
Leon Trotsky -- all victims of the revolutions they
helped create.

Answers

Bill seems to miss the nail -big time.
Very much like the printing press let
information and ideas spred amongst
the masses in Martin Luther's time--
the internet opens an amazing amount
of info at my-your fingertips -in my-
your house--at any time. To hell with
the Nkes, I can expand my intellectual
horizons forever.

Forest, you are, respectfully, another snotnose. On the other hand I
hate the 'Establishment' also. Gutenberg didn't change a thing and
neither will the Internet. They just spread it out among an
exponentially greater audience. So, where does that leave me? I must
go and play hearts on Yahoo and forget about it.